Dr Reddy's expects emerging markets profit hit

By Zeba Siddiqui

MUMBAI (Reuters) - India's second-largest drugmaker, Dr Reddy's Laboratories Ltd, expects its earnings to remain under pressure in the fourth quarter due to currency volatility in markets such as Russia and Venezuela, its chief financial officer said.

A 28 percent slump in emerging market sales in the quarter ended Dec. 31 pushed Dr Reddy's total profit for the period below analysts' estimates, driving its shares down to close 4 percent lower on Tuesday.

Dr Reddy's, run by the Indian billionaire GV Prasad, said net earnings for the quarter were 5.79 billion rupees ($85 million), up from 5.75 billion rupees a year earlier. Analysts had on average expected 6.55 billion rupees.

While the company has not disclosed how much Russia and Venezuela contribute to its profit, business in both markets has been a drag on the firm's earnings for several quarters. Sales declines overshadowed a 7 percent rise in third-quarter revenue from its largest market, the United States, and a 34 percent rise in sales from India.

The company has yet to get about $60 million repatriated from Venezuela, CFO Saumen Chakraborty told analysts.

The country's fourth-largest drugmaker, Aurobindo Pharma Ltd, said in a separate statement that its net profit rose 39 percent to 5.35 billion rupees, helped mostly by higher sales in the United States.

That was slightly below analysts' estimates of 5.54 billion rupees, as Aurobindo's Europe sales fell 10 percent due to currency depreciation, the company said. Aurobindo shares closed 0.3 percent lower.

While Aurobindo's U.S. business has benefited over the last year, mainly from a series of new drug approvals and launches, Dr Reddy's sales in the region are under pressure.

The U.S. Food and Drug Administration warned Dr Reddy's in November for violations of manufacturing standards at three of its factories, a move that could jeopardise marketing approvals of drugs produced at the site.

Chief Operating Officer Abhijit Mukherjee told analysts that the company had responded to the FDA with a detailed plan on how it would fix those problems.

Some analysts have expressed worries that the FDA could ban imports from the plants if it remains dissatisfied.

Mukherjee said Dr Reddy's expects to file two products for U.S. approval every year, and hopes the next fiscal year's drug launches "would be better" than this year's.

($1 = 68.0100 rupees)

(Reporting by Zeba Siddiqui in Mumbai; Editing by Sunil Nair and Alexander Smith)